Should You Rollover Your Old Employer's 401(k)? #AskTheMoneyGuy

welcome to another episode of ask the money god that's right you guys have the financial questions we've got the financial answers you've got your favorite social use the hash tag ask the money guy you can go to our website money guy calm or you can leave a question the comments below it's Brian Preston the Buddy Guy so Brian today's question is when we get all the time we get this from friends clients relatives family members and it's something I think that almost every person who has ever had a job is probably going to face and it generally go something like this hey I just left employment what do I do with my old 401k should I roll over my older time at plan don't you wish it was just that easy you know I wish it was yeah this one rule is gonna help you every single time so guys we're gonna walk you this because you really have four options and we're gonna give you this kind of nuance so you have to hang in there with this the first one is cash it out show me the money dare I say this is the worst option this is not the one you'd really want to employ but unfortunately I think that this is the option that people most often pursue yeah I know a lot of people realize if you have over five grand they can't just take your they send you a check but if you have a really teeny tiny account with only a few hundred bucks there is a good chance if you're not proactive they will just send you a check but I will agree with beau you should not cast your 401k out so let's just put a big X next to that one that's not gonna be a good decision and why because it would be taxable to you if it's pre-tax or fast pre-tax dollars in the end if you're under fifty nine and a half there's gonna be a penalty associated as well so what is very costly to get access to I can't tell how many times I've seen a family member leave a job cash out their 401k and that's what they want a vacation with no wonder why I have no money at retirement now what you want to do so the next one option just leave it at the full 1k provide your current your past job you left there leave it there so here's why that might be a good choice there's a lot of good companies that have partnered with custodians like Vanguard fidelity that you know they have these great 401k low-cost index funds you're gonna be like wow this is a good retirement plan so it doesn't make sense the necessarily getting a hurry to take your money out of that account so you have to take that into a consideration there's also some tax planning strategies if you're like a high-income individual who's working through like a Roth conversion type strategy you'd understand that it might make sense to leave your 401k in the 401k structure so it doesn't impact the taxability of future Roth conversions you may make so that leads to option 3 roll it over now the first thing we just we just totally gushed on of your previous 401k provider because it said a low-cost provider that I provided you know access to index funds didn't have anything that was really punitive but then unfortunately that's not all retirement plans they are not already for one case and have sub account fees annuities hack cost of just not good investment choices so there's a lot of bad things going on so when you leave that employer and you realize you knew you had a stinker of a retirement plan you can set up an IRA rollover and do a trustee to trustee transfer so there's not any tax consequences and roll it into a low-cost custodian so that you can choose your investments and have better choices there are two really big benefits of doing that you just said that it opens up the entire investment universe to those dollars and then second it's easy to keep track of now you don't have to worry about keeping up with the annual notices from your previous employer and having to contact your previous employers HR if you have questions it just allows you to take control of those assets so they're no longer associated with that previous employer previous plan and then the fourth option you probably leave one job you're going to another job and your new job is also going to have a 401k provider there's a chance you might get into one of those gushing plans that we love that's low cost index funds and if that's the case you might want to consider rolling your old plan into the new provider because it what if you come this might be a just grow up and grows up almost here the Mario Growth sound and the background is because you went from a bad provider to now you have the option of a really good provider this is a chance for you to upgrade your retirement option and I'll even say it there's chances because bo alluded to the fact that sometimes you're at a high income situation you make great income that preclude you from being or do Roth contributions there might be a Roth conversion strategy in your future so you need to get these IRA assets out of your name a good opportunity is if you have a good retirement plan you can roll into the new plan and a common misnomer is that if you roll into new 401k you might be handicapped a handicapped and that might not be or handcuffed and that might not be your money more it's not true any money that you roll into your 401k you were still a hundred percent vested in it's still your money so it's not like you're locking it ups in some different way than it was already locked up so if I could summarize everything we just talked about it sounds like everybody needs to know some basic components of your options you need to know how good are the investments if I had my current employer as well as the future employer and I'm going to what are the internal operating expenses of the plans my old one my new one and what options do I have in an IRA rollover I could set up and then what is the compensation of whoever's giving me such are taking it may be your 401 K has Commission's or it has really high fees understand all those different things that are coming out of your account so you can make sure you're making the best decision for your personal finances this is a great question if you have a question maybe you're changing jobs you're going through a big life circumstance change feel free to reach out to us you can go to your favorite social use the hashtag ask the money guy you can go to our website money guy com or you can even leave a question for us below in the comments thanks so much and keep the questions coming money got team out

Channel: The Money Guy Show

Views: 30,694

Keywords: money guy show, debt, budget, cash, real estate, insurance, how to make money, save, credit card, compound interest, buying house, buy stock, success, personal finance, Should You Rollover Your Old Employer's 401(k)? #AskTheMoneyGuy

Id: gAqBcrvPvoQ

Length: 5min 58sec (358 seconds)

Published: Wed Oct 30 2019